**3. Italian regulation: problems and prospects**

Italy was the first European country to have introduced a specific discipline for crowdfunding. In particular, the legislator has created legislation dedicated only to equity-based crowdfunding, while for other models—donation, invoice, pre-purchase, real estate, reward and royalty—the already existing regulation for similar financing methods is used [9, 14]. The only exception is social lending, which was recently, even if only minimally, regulated within the new provisions for the collection of savings from parties other than banks.

The interest in crowdfunding in Italy has grown above all because the companies are mainly of SME and encounter many difficulties in finding adequate financial resources for their development. This is even more evident for the start-up.

For this reason, a particular type of start-up, those c.d. "Innovative", was inserted into the Italian legal system by the Decree-Law no. 179 of 18 October 2012 (converted into Law no. 221 of 17 December 2012) (also known as "Decreto crescita bis") in the articles 25–32. The Decree has included in the Consolidated Law on Finance, i.e., Legislative Decree no. 58 of 24 February 1998, the article 50 quinquies "management of crowdfunding portals for the small- and medium-sized enterprises and for the social enterprises" and the article 100 ter "offers via crowdfunding portals". The Decree has also delegated to Consob the rules applicable to the management of portals and to offer for raising capital. In particular, the text is the "Regulation on "the collection of risk capital via on-line portals" (adopted by Consob with Resolution no. 18592 of 26 June 2013 and successively amended by resolutions no. 19520 of 24 February 2016, no. 20204 of 29 November 2017 and no. 20264 of 17 January 2018).

#### *Banking and Finance*

Over the last few years, the crowdfunding discipline has undergone numerous modifications, which have significantly changed its features. This evolution must be attributed mainly to two reasons: one of a political-economic nature and a second of a legal order.

From a political-economic point of view, it is important to support the development of entrepreneurial activities, offering alternative channels with respect to traditional lending for finding resources for growth, also through the promotion of forms of investment (and not real financing).

From a more strictly legal point of view, the modification interventions reflect a process of progressive refinement of the national discipline in light of the concrete application experience and the European regulatory framework. In fact, also due to the absence of a specific community framework, the regulation of equity crowdfunding has sometimes shown points of imperfect coordination with certain legal categories typical of financial market law, including in particular those of investment services and offers to the public.

The most significant change is represented by the extension of the audience of subjects who are allowed to offer shares of risk capital through portals.

Indeed, with the Decree Law no. 3 of 24 January 2015 (converted with Law no. 33 of 24 March 2015), also known as the "Investment Compact", the category of "innovative" SMEs was introduced, extending to them some of the facilitations envisaged for Innovative start-up.

In particular, together with innovative SMEs, UCITS and companies that invest mainly in innovative start-ups have been added. This extension has not achieved the objectives hoped for in terms of increasing the number of bidders, given the difficulty for companies to comply with the subjective requirements—related to the innovative nature—provided for by the Decree Law. Among these, for example, it includes the achievement of a volume of expenditure in research, development and innovation in an amount equal to or greater than 3% of the greater entity between cost and total value of the production of the innovative SME.

For this reason, with the Budget Law for 2017 (paragraph 70) the article 50 quinques of the Consolidated Law on Finance has been amended: the legislator has decided to allow, generally, to all SMEs, also constituted in forms of limited liability companies, to access financing channels different of banking channels, to thus more easily find the capital needed to carry out their projects. This is a very significant extension, as it greatly expands the number of companies which can use equity crowdfunding.

The objective of fostering SME development through the spread of the crowdfunding tool is the basis of other regulatory changes, such as the following:


The expansion of the crowdfunding subjects, on the other hand, required a strengthening of measures to protect investors. In this sense, the legislator has deemed it necessary to increase powers of the Consob of control over the activity

**219**

*Crowdfunding: The Case of Italy*

more stringent conditions.

conflicts of interest

if exempt from the MiFID.

*DOI: http://dx.doi.org/10.5772/intechopen.90940*

In particular, it regards the following profiles:

paragraph 3, of the Consolidated Law on Finance)

of the portals. In particular, Consob calls the managers, directors, statutory auditors and personnel, requests the communication of data and of information and may request the communication of data and information and the transmission of deeds and documents, fixing the relative terms, and may also carry out inspections

A further novelty in the discipline of equity crowdfunding concerns, directly or indirectly, the implementation in Italy of Markets in Financial Instruments Directive (MiFID II). In fact, although operating under the regime of exemption from the MiFID, the operation of the portals, precisely by virtue of the provisions of Directive 2014/65 (for "exempt" companies), was subjected to the application of

• The obligation for equity crowdfunding portals to adhere to system of indemnification to protect investors or taking out an insurance policy for professional responsibility that guarantees protection equivalent to clients according to the criteria established by Consob through its regulation (article 50-quinquies,

• The obligation for portals to develop a more rigorous and detailed policy on

• The delegation to Consob for the adoption of internal systems of reporting

paragraph 1 of this Article, equivalent protection to their clients is ensured".

ened the regulations already contained in Consob Regulation no. 18592 of 2013, requiring portals to communicate to customers the nature and sources of conflicts of interest, in the event that the measures adopted were not sufficient to exclude the risk of damaging interests of the same. In this perspective, the introduction of an ad hoc regime for the offer on the portal of quotas or shares issued by the same manager or by

subsidiary/controlling companies (c.d. "autocollocamento") must be read, too.

infringements (whistleblowing, i.e., specific procedures for reporting of the facts that could constitute violations of the regulations governing the activity done)

In particular, with reference to point (a), the article 3 of MiFID II states that: "member States shall require persons exempt from this Directive pursuant to paragraph 1 of this Article to be covered by an investor-compensation scheme recognised in accordance with Directive 97/9/EC. Member States may allow investment firms not to be covered by such a scheme provided they hold professional indemnity insurance where, taking into account the size, risk profile and legal nature of the persons exempt in accordance with

With regard to management of the conflict of interest (point (b)), Consob strength-

With reference to the granting to Consob of the proxy to adopt the implementing provisions of the article 4-undecies of the Consolidated Law on Finance in the matter of whistleblowing (point (c)), it derives from the desire to extend the obligation to adopt internal reporting procedures for offenses, provided by article 71 of the Directive 2013/36/UE, also to those who provide investment services, even

Finally, it is important to point out that, during the revision of the Crowdfunding Regulation, Consob has decided to reduce, only in specific cases, the threshold of financial instruments that must be signed, in relation to each offer, by qualified investors. Specifically, there is a lower threshold—equal to 3% (and not 5%)—for offers made by SMEs with financial statement certification, relative to the last 2 years prior to the offer, prepared by an auditor. This is a change made by Consob to the outcome of the consultation process, at the request of the market. In the

(article 50-quinquies, paragraph 6, of the Consolidated Law on Finance).

#### *Crowdfunding: The Case of Italy DOI: http://dx.doi.org/10.5772/intechopen.90940*

*Banking and Finance*

of a legal order.

forms of investment (and not real financing).

ment services and offers to the public.

envisaged for Innovative start-up.

invest in SMEs

of innovative start-up qualification

Over the last few years, the crowdfunding discipline has undergone numerous modifications, which have significantly changed its features. This evolution must be attributed mainly to two reasons: one of a political-economic nature and a second

From a political-economic point of view, it is important to support the development of entrepreneurial activities, offering alternative channels with respect to traditional lending for finding resources for growth, also through the promotion of

From a more strictly legal point of view, the modification interventions reflect a process of progressive refinement of the national discipline in light of the concrete application experience and the European regulatory framework. In fact, also due to the absence of a specific community framework, the regulation of equity crowdfunding has sometimes shown points of imperfect coordination with certain legal categories typical of financial market law, including in particular those of invest-

The most significant change is represented by the extension of the audience of

Indeed, with the Decree Law no. 3 of 24 January 2015 (converted with Law no. 33 of 24 March 2015), also known as the "Investment Compact", the category of "innovative" SMEs was introduced, extending to them some of the facilitations

In particular, together with innovative SMEs, UCITS and companies that invest mainly in innovative start-ups have been added. This extension has not achieved the objectives hoped for in terms of increasing the number of bidders, given the difficulty for companies to comply with the subjective requirements—related to the innovative nature—provided for by the Decree Law. Among these, for example, it includes the achievement of a volume of expenditure in research, development and innovation in an amount equal to or greater than 3% of the greater entity between

For this reason, with the Budget Law for 2017 (paragraph 70) the article 50 quinques of the Consolidated Law on Finance has been amended: the legislator has decided to allow, generally, to all SMEs, also constituted in forms of limited liability companies, to access financing channels different of banking channels, to thus more easily find the capital needed to carry out their projects. This is a very significant extension, as it greatly expands the number of companies which can use equity crowdfunding.

The objective of fostering SME development through the spread of the crowd-

• The enlargement of the list of so-called managers of rights to SGRs, SICAFs and SICAVs, limited to the offer on portals of UCITS shares, which mainly

• The extension to all SMEs constituted in forms of limited liability companies of the simplified quota circulation mechanism provided by the paragraphs

• The repeal of the obligation for intermediaries to register the shares held on behalf of the subscribers (or buyers) directly to them, after 2 years of the loss

The expansion of the crowdfunding subjects, on the other hand, required a strengthening of measures to protect investors. In this sense, the legislator has deemed it necessary to increase powers of the Consob of control over the activity

funding tool is the basis of other regulatory changes, such as the following:

2-bis. of the article 100-ter of the Consolidated Law on Finance

subjects who are allowed to offer shares of risk capital through portals.

cost and total value of the production of the innovative SME.

**218**

of the portals. In particular, Consob calls the managers, directors, statutory auditors and personnel, requests the communication of data and of information and may request the communication of data and information and the transmission of deeds and documents, fixing the relative terms, and may also carry out inspections (article 50-quinquies, paragraph 6, of the Consolidated Law on Finance).

A further novelty in the discipline of equity crowdfunding concerns, directly or indirectly, the implementation in Italy of Markets in Financial Instruments Directive (MiFID II). In fact, although operating under the regime of exemption from the MiFID, the operation of the portals, precisely by virtue of the provisions of Directive 2014/65 (for "exempt" companies), was subjected to the application of more stringent conditions.

In particular, it regards the following profiles:


In particular, with reference to point (a), the article 3 of MiFID II states that: "member States shall require persons exempt from this Directive pursuant to paragraph 1 of this Article to be covered by an investor-compensation scheme recognised in accordance with Directive 97/9/EC. Member States may allow investment firms not to be covered by such a scheme provided they hold professional indemnity insurance where, taking into account the size, risk profile and legal nature of the persons exempt in accordance with paragraph 1 of this Article, equivalent protection to their clients is ensured".

With regard to management of the conflict of interest (point (b)), Consob strengthened the regulations already contained in Consob Regulation no. 18592 of 2013, requiring portals to communicate to customers the nature and sources of conflicts of interest, in the event that the measures adopted were not sufficient to exclude the risk of damaging interests of the same. In this perspective, the introduction of an ad hoc regime for the offer on the portal of quotas or shares issued by the same manager or by subsidiary/controlling companies (c.d. "autocollocamento") must be read, too.

With reference to the granting to Consob of the proxy to adopt the implementing provisions of the article 4-undecies of the Consolidated Law on Finance in the matter of whistleblowing (point (c)), it derives from the desire to extend the obligation to adopt internal reporting procedures for offenses, provided by article 71 of the Directive 2013/36/UE, also to those who provide investment services, even if exempt from the MiFID.

Finally, it is important to point out that, during the revision of the Crowdfunding Regulation, Consob has decided to reduce, only in specific cases, the threshold of financial instruments that must be signed, in relation to each offer, by qualified investors. Specifically, there is a lower threshold—equal to 3% (and not 5%)—for offers made by SMEs with financial statement certification, relative to the last 2 years prior to the offer, prepared by an auditor. This is a change made by Consob to the outcome of the consultation process, at the request of the market. In the

consultation document, in fact, the 5% threshold had been confirmed, despite the difficulties (very) often encountered by the portals in meeting this requirement. Also driven by the sector operators, Consob has decided to introduce a reduced threshold at least for larger companies, for which a technical situation is available.

In conclusion, the frequent regulatory interventions have constituted an element of instability for the sector and, therefore, a brake on the development of crowdfunding operations.
